merck Medicare is suing the federal government over its plan to negotiate drug prices, calling the program a sham equivalent to extortion.
The drugmaker is seeking to halt the program, which was placed in the Inflation Reduction Act and is expected to save taxpayers billions of dollars in coming years.
Merck said in a complaint filed Tuesday that the program does not include real conversations. Instead, it said U.S. Department of Health and Human Services Selects drugs to include and then sets price, threatening drug makers with “a devastating daily excise tax” if they refuse to agree.
“This is tantamount to extortion,” the drugmaker said in the complaint, which was filed in the US District Court for the District of Columbia.
The Rahway, New Jersey-based drugmaker said it expects its diabetes treatment Januvia to be part of a “plan for an IRA” starting later this year.
Representatives for the federal agency did not immediately respond to requests for comment from The Associated Press.
Merck said in the complaint that the plan set forth in the IRA suggests that federal officials will sit down with drugmakers and negotiate voluntary price agreements.
But the drugmaker said the program does not involve actual negotiations or agreements. It states that HHS chooses drugs to include and then relies on drug manufacturers to provide steep rebates under threat of tax.
Merck says the program violates the US Constitution in several ways. They incorporate the Fifth Amendment’s requirement that the government pay “reasonable compensation” when it takes “property for public use,” according to the complaint.
The drugmaker said Congress could allow HHS to dictate the maximum price to be paid for the drug or use its leverage to negotiate, but that would allow drugmakers to walk away from negotiations.
Instead, Merck said the government uses the threat of severe punishment to demand drugs and refuses to pay fair prices, forcing drug makers to “grin, play along and pretend that it part of a ‘fair’ and voluntary exchange.”
“This is political kabuki theatre,” the complaint said.
Republican lawmakers have also criticized President Joe Biden’s administration over the plan, noting that it could force drugmakers to hold back on introducing new drugs that could be subject to bargaining.
The federal government is expected to soon issue rules for negotiating drug prices and then in September publish a list of 10 drugs that will begin price negotiations next year.
The plan marks the first time that the federal government will negotiate directly with drug companies on the prices charged for some of Medicare’s most expensive drugs.
The negotiated prices will not hold until 2026.